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Version No. 1 Austin Unlikely as it might seem that the Observer would ever take up cudgels in defense of Ben Barnes \(who hardly ever lacks champions the weight of the recent flap over Barnes by carefully reading the transcripts of the testimony of Frank Sharp and John Osorio concerning Barnes. In reporting the testimony, newsmen have not infrequently fuddled the difference between an inference and an implication and a few of them have downright misused the word accusation. The Observer must count itself among the sinners in the former category, as has been acidly pointed out to us by Robert Spellings, Barnes’ executive assistant. Ed. Houston Q: Do you recall having a conversation in the offices of the Sharpstown State Bank or the Sharpstown Realty Company with Mr. Osorio concerning generally the fact that during the pendency of this legislation in the Legislature he had to take care of some prominent figure in Texas political circles in order to get the legislation through? Sharp: That he had … is that … Q: Some prominent figure in Texas political circles had to be taken care of in order to assure the passage of the legislation. Sharp: Mr. Simms, I I can’t remember that .. I … of course, like I say, I’m getting tired and I’m getting fuzzy anyway, but I can’t remember Mr. Osorio making this particular statement to me. Q: Do you recall any discussions in this area in which you and Mr. Osorio for any reason may have left your offices and gone down into the shopping center mall where you could speak privately? Sharp: Oh, I think I know what you’re talking about now … after the bill passed, and before Governor Smith vetoed it, John Osorio came to Houston and was in my office there in the bank, and we were talking and he said well Ben delivered as he said … delivered … and I . Sharp: Ben. And I said hold everything, John, let’s you and I walk out into the mall. I’m never sure that my office is not bugged. And then when we got out into the lobby I said to him … I said now, are you telling me that we’re obligated to Ben Barnes for this? And he said, oh, no, no I just … oh no, no … I’ve already taken care of that, he said, you know Ben is smarter than most of these other politicians … he takes only cash. So I said well, as long as I don’t know about it, that’s your business. And that was the story. Q: Mr. Sharp, I don’t have any further questions for you today, and we’ll recess at this time if there is no objection from the other attorneys here, and resume in the morning at 9:30. * * * Q: Mr. Sharp, you will recall that, at the end of the proceedings on yesterday, you were discussing the conversation that you had with Mr. Osorio on the premises of the Sharpstown State Bank after the bank insurance legislation had passed both houses of the legislature. Do you recall that, sir? Sharp: Yes, sir. Q: Aside from you and Mr. Osorio, were there any other persons present during that conversation? Sharp: No, sir. Q: Did you make any kind of memorandum or note with regard to the conversation, the substance of the conversation that you and Mr. Osorio had on that occasion? Sharp: No, sir. Q: Was it you under , did, uh, for the record, let’s again ask you what Mr. Osorio told you on that occasion, if you will please. \(Objection by other counsel: Sharp: I don’t think that I could say it in the ex act words. Q: Now, I want the witness to repeat … and answer the question I asked him. Sharp: Now, then, to the best of my memory, this is the way it happened. Mr. Osorio was in my office in the Sharpstown State Bank and between telephone calls and all, he said well, “Ben delivered,” and I said “John, let’s step out in the mall,” and when we got in the mall, I said, “I never know whether my office is bugged or not and let’s get out here.” I said, “Are you about to tell me that I am indebted to Ben for his part in the passage of this bill?” And he made a sound like, “Oh, no, no, no, no. I have already taken care of that.” And I said, “Well, fine.” Then he volunteered the remark that, you know, Ben is smarter than most of these politicians. He wants cash. One thing that I don’t believe I said yesterday, I remember him reminding me of that it takes from twenty to twenty-five thousand dollars a month to . he says I am told that it takes from twenty to twenty-five thousand dollars a month to keep his boat afloat, and he said that; and I said, “Well, fine, I have no obligations to him,” and he said, “That’s right.” Q: Did Mr. Osorio on that occasion tell you how he had taken care of Ben Barnes? Sharp: No, sir, he didn’t. Q: Did you ask him how he had? Sharp: No, sir. I did not. Q: Did you have, was that the first conversation that you had with Mr. Osorio concerning any consideration that he may have paid to Lieutenant Governor Barnes in aid of passage of the bank insurance legislation? Sharp: We had had no discussion whatever about any help to Ben Barnes at any time and this is why I asked him the specific question, “Are you telling me that I am indebted to him?” Q: Did this conversation occur after you had had the telephone conversation that you testified yesterday with Mr. Osorio concerning the requirement or demand by Senator Schwartz, that he receive a loan in exchange for removing his tag or favorable consideration of the bill? Sharp: Oh, yes. This conversation with Mr. Osorio was after the bill had been passed and before Governor Smith had vetoed it. Q: Did you have any later conversations with Mr. Osorio concerning his payment of funds or the causing of funds to be paid to Mr. Barnes for this purpose? Sharp: No, sir. Q: That was the one and only conversation? Sharp: And I was glad about the deal. Q: You did not later learn how Mr. Osorio had taken care of this obligation. Sharp: No, sir, and I did not inquire, I might add. Q: Do you know now how he took care of it? Sharp: No, sir, I do not. Q: Do you know, Mr. Sharp, whether Mr. Barnes has any obligation at Sharpstown State Bank as a result of this matter? Sharp: He does not as far as I know. Q: Did you ever learn whether or not he had any obligations at City Bank and Trust in Dallas as a result of this matter? Sharp: Well, Mr. Simms, I wasn’t familiar enough with what was happening and it was either the City Bank or the Dallas Bank & Trust, and it was all hearsay, but I heard that one of the banks made a loan to him in approximately $60,000, and I don’t know the accuracy of it and whether that’s the exact amount. Q: Where did you hear that information, sir? Do you recall? Sharp: No, sir, I really don’t. Probably it was in one of the newspapers. Q: Mr. Sharp, is your recollection that you heard about the loan from City Bank and Trust to Mr. Barnes prior to the SEC filing this action in Dallas? Sharp: Before I answer that question, get everyone to sit down, please? O.K. Now, would you read the statement? Q: Would you read that back, please. RESTATEMENT: Court Reporter Mr. Sharp, is your recollection that you heard about the loan from City Bank and Trust to Mr. Barnes prior to the SEC filing this action in Dallas? Sharp: No, it was after this. Version No. 2 Houston Cross-examination of John Osorio by the attorney for defendants Stock and Akins: Q: Did you know that Lt. Gov. Ben Barnes had a loan with the Dallas Bank and Trust? Osorio: No, I didn’t. Q: Did you ever attempt to obtain a loan for Lt. Gov. Ben Barnes with Dallas Bank and Trust? Osorio: No, the best I recall on that is that Mr. Tom Butler,. who was a member of the control group of City Bank I think inquired of Mr. Barnes and I told him I put him in touch with Mr. Akins. Q: Mr. Akins was out at the bank? Osorio: Was at the Dallas bank. Q: Was there any connection between that event and the banking bill legislation before the Texas House or Senate? Osorio: None whatsoever. Q: Do you know or did you know that the Dallas Bank and Trust required two co-signatures on that note with Lieutenant Governor Barnes? Osorio: I know it now, but I did not know at the time because I did not know the loan was made there. Q: Did you know that they required some considerable collateral in National Data Communications stock to protect that loan? Osorio: I know it now, but I did not know it then. Q: Assume for a moment hypothetically that the lieutenant governor of the State of Texas attempted to make a loan from a bank reputed to be a political favor by some and that bank required two additional co-signatures and a considerable amount of stock to be put up as September 10, 1971 5